Despite shortcomings, stimulus called a must

Excerpt

The following is from the Feb. 1, 2009, edition of The San Francisco Chronicle. Professor Mike Davis, a professor of economics and finance in SMU's Cox School of Business, provided expertise for this story.

February 2, 2009

Carolyn LochheadChronicle Washington Bureau

Washington - -- The Obama stimulus, as history will know it, is change you can believe in. That $900 billion and counting reflects the outcome of the November election and the ascendancy of at least eight years of pent up Democratic ideas. The stimulus aims not just to revive the economy, but to shift the role of government, from a vastly increased participation in education and health care to federal investments in science, technology, mass transit and alternative energy.

Whether it will work is another question. There are plenty of experts who say it won't, and plenty who say it will. . .

Much of the spending may come too late. Historically, stimulus bills reach the economy after a recovery has begun. This happened in 1949, 1958, 1961, 1971, 1975, 1983 and 1991, according to a list compiled by former Reagan administration Treasury official Bruce Bartlett.

The Congressional Budget Office found that only a fraction of the money, $170 billion, will be spent this fiscal year, when the recession is expected to be at its worst, while about the same amount will be spent in 2011, when the recession should be over. Most, $356 billion, will be spent in 2010.

"This is about big construction infrastructure," said Mike Davis, a professor of economics and finance at the Cox School of Business at Southern Methodist University. "It would take many, many months into years to get most of that on line, about the time the economy is recovering. It's just a mess, I'm afraid."